Five Prime Therapeutics is one of those companies built on the old school biotech business model. Take a cutting-edge scientific concept, mix in top scientists and big name venture backers, and see what you get 10 years later.
Now it’s been eight years, and the company is moving toward the point in clinical trials where everyone will soon see if it’s going to deliver a hit or not.
For those new to the story, Five Prime was founded in 2002 by one of the Bay Area’s big scientific names—Lewis “Rusty” Williams. He was the former chief scientific officer at Chiron, a co-founder of COR Therapeutics, a UC San Francisco scientist, and an investigator for the exclusive Howard Hughes Medical Institute. Williams pursued the bold notion that what drug developers needed was not just a good hypothesis around a single protein drug that might work against a single target, but rather a comprehensive library of all the secreted proteins in the body and their receptors on cells, to serve as the basis for screening lots of new drug candidates.
This notion attracted big name investors early on, like Kleiner Perkins Caufield & Byers, Versant Ventures, and TPG. Five Prime has gone on since then to attract partnership dollars from the likes of Pfizer, Johnson & Johnson, and GlaxoSmithKline. The operation has grown to 115 employees at San Francisco’s Mission Bay biotech cluster, across the street from the UCSF campus. I got an update a couple weeks ago when I stopped by to visit CEO Julia Gregory and Aron Knickerbocker, the company’s vice president of business development.
“This is a biotech CEO’s dream,” Gregory says.
The latest bit of news from Five Prime came in early August, when it secured $15 million in an upfront fee from Glaxo, plus $124 million in potential milestone payments, to screen various combinations of biological targets and drug candidates for skeletal muscle disorders. Getting that deal means that more than $200 million has gone into the company in its eight-year history, Gregory says.
While Five Prime isn’t yet running in the black because of its partnerships, they have been productive enough to allow the company to avoid raising any new venture capital since 2005. Given what has happened to startup valuations in the last few years, that’s certainly part of what made Five Prime appealing to Gregory, who left her position as chief financial officer of The Woodlands, TX-based Lexicon Pharmaceuticals (NASDAQ: [[ticker:LXRX]]) to join the San Francisco startup as CEO in June 2009. This was the “dream job” she was looking for—world-class science, committed financial backers.
That said, investors at some point in a biotech company’s life will start valuing the company based on the product candidates it has in the pipeline, not on the science. The company has a library of 4,500 secreted proteins, and at some point at least one of them has to make it into late-stage clinical trials that can generate a valuation in the billions. That’s the transition period Five Prime is entering, and it’s what I most wanted to ask Gregory and Knickerbocker about.
“We want our products to be first in class, and best in class. Not just first, but best,” Gregory says.
OK, so what does the company have now? It’s building a pipeline of drug candidates for cancer, immunologic disorders, and diabetes. “Three little areas,” Gregory joked.
The lead drug is called FP-1039. It’s a genetically engineered protein drug made to specifically bind with, and inhibit, proteins from the family
